Archaic payments present challenges for Aussie companies

More than half of Australian businesses struggling with payment innovation have concerns about near-term survival…

Forget ‘digital transformation’ for a second and consider ‘payment transformation’ as a potential business issue, as research from financial services company American Express uncovered good reasons for Australian businesses to buy into its offerings.

That’s because, it said, 59 percent of companies yet to widely modernise payment practices are at ‘significant risk’ of failing in the next three years. The company said in a statement that another 19 percent were at moderate risk of collapsing. What it didn’t make clear was whether risk of failure was directly related to not using stuff like blockchain, mobile wallets, APIs and Virtual Card Numbers; these companies may well have other fish to fry.

In any event, Amex’s Payment Revolution research also showed that around half of all Australian businesses struggled with making payments to suppliers (44 percent) or receiving payments from customers (48 percent).

Amex polled 355 Australian CFOs from businesses with annual revenue values between $2 and $300 million from 15 different industries. One third (30 percent) of these businesses were unable to reconcile supplier invoices at least every other month.

The survey found at-risk businesses were struggling with archaic financial processes, increasing payment volume and concerns about issues such as security and regulation.

Around a third of surveyed businesses were still yet to widely modernise their payment approach to managing payments, with only 22 percent moving to a completely automated solution. These businesses were much more likely to suffer from issues such as cash flow problems, accessing capital and customer retention.

Martin Seward, ‎SME VP at Amex’s Australian office, said it was ‘critical’ (he probably meant ‘crucial’) that struggling companies changed their approach to payment. “We are approaching a financial event horizon for many Australian businesses. The research tells us they can’t sustain this outdated approach to managing payments much longer.”

‘Event horizon’ is a term borrowed from general relativity and describes a boundary in spacetime beyond which events cannot affect an outside observer. In common parlance, it simply means a point of no return.

“The most alarming part is that the research shows that a lot of this concern is avoidable. Companies that push through changes to payment processes not only survive, they thrive,” Seward added.

The research found businesses that embraced emerging payment technologies were almost twice as likely to pay suppliers on time, more than two times better at managing cash flow and three times better at processing payment than other businesses.

These early adopters were also almost twice as successful at customer retention as those with poor payment practices and they expected to see a business revenue increase of 20 percent or more during the coming year.

The research also suggested that other companies were expecting to follow suit, with 76 percent of senior financial executives saying a payment overhaul had a high or very high priority over other business objectives. Some 89 percent of companies had allocated funding this financial year for payments modernisation processes, with 39 percent having already invested between $50,000 and $100,000 to improve payments over the past three years.

Executives also indicated that they would turn to emerging technologies to help transform their business’ approach to payments during the next 12 months. Of those which don’t already use these technologies, some 20 percent of companies would soon use APIs to streamline payments, 18 percent would deploy smartphone mobile wallets, 16 percent would increase mobile transactions, 12 percent would trial Blockchain-style distributed ledger technology and 11 percent expected to incorporate Virtual Card Numbers to improve business transactions.

Overall 38 percent of companies expected to deploy at least one new technology during the coming year.

“The findings highlight the appetite amongst senior financial executives to invest in innovation. Many of these technologies are still maturing, however, early adopters are already seeing the benefits of modernising the approach to payment,” Seward said.